The interview was conducted by Ricarda Richter and Kolja Rudzio.

Ms Mauderer, climate researchers have been warning us for years about the consequences of extreme weather events such as heatwaves, droughts and floods. But why is the Bundesbank concerned with this?

Our job as central bankers is to ensure stable prices and a robust financial system. Climate change can make many things more expensive, especially food and energy. Economic growth can suffer and the financial system may come under pressure. We have to consider these risks in our work. Naturally, we also warn others, like banks and governments, about these risks. As technocrats, we have no political mandate and only consider the financial risks posed by climate change. 

And how great are they?

Together with other central banks, we have developed scenarios with a five-year horizon, for each of which we assume different climate policies. We call the most favourable scenario “Highway to Paris”. In that one, we assume that countries all over the world make early efforts to mitigate climate change. Even so, in this case, EU inflation would at times track 0.5 percentage point above a baseline scenario, but GDP would be 0.1 % higher.

And what would the worst scenario look like?

In that one, we assume that no progress is made on climate policy and that extreme weather events, such as heatwaves, droughts or floods, occur in two consecutive years at an intensity that is only observed for each of them every 50 years. This would temporarily reduce EU GDP by up to 4.8 % compared with the baseline scenario. And inflation would rise by up to 0.6 percentage point. Asia would see a 6.3 % GDP drop, and inflation would climb by up to 1.2 percentage points. There would be dramatic implications, in other words.

And do you point out these potential losses to the government?

Yes. But our scenarios are used by pension funds as well, and the Norwegian oil fund, for their investment decisions. 

Do you also use such scenarios for your interest rate decisions?

As central banks, we tend to focus on medium-term developments. But because global warming is such a complex phenomenon, we in Europe cannot wait to deal with it only when things get serious. And in other parts of the world, it is already serious. 

Your concern is financial stability. Can climate change lead to a global financial crisis?

I would be very cautious about proclaiming a global financial crisis. We closely observe which actors are affected by the climate and how: firms and their supply chains, banks, or investors considering how much money they still want to invest in which region. It is still very difficult to predict the interplay between these factors. Especially since there will be some years with very high climate damage and others with less.

You developed the scenarios with a network of central banks. How did that come about?

At the end of 2017, the central banks of France, the United Kingdom, Mexico, the Netherlands, Sweden, Singapore, China and Germany came together and said: we need to better understand what climate change means for prices, financial stability and the economy as a whole. And relatively quickly we had to face the fact of how much the issue impacts us. Many other central banks joined us, and our loose network has today become an international organisation with members from 95 countries. 

What shape does this cooperation take?

I’m on calls almost daily with colleagues from other countries. We also meet regularly and everyone reports on what is going on at their end at the moment. For example, what longer power outages mean for productivity, how prices are affected when crops are wiped out by floods. In Pakistan, for instance, inflation went up by 17 percentage points in 2022 after severe flooding, while food prices rose by as much as 40 %.

Can you learn anything from these kinds of experiences in other countries?

We write manuals. When a certain weather phenomenon occurs for the first time in my country, I can check them to see, for example, how Australia, say, deals with severe flooding. 

The US central bank, the Federal Reserve, was also a member of your network. It left shortly before President Donald Trump’s second term of office began. What does it mean when the climate evidently no longer matters to such an important central bank?

I’m sorry that they left. But it hasn’t changed anything about our work with the other 94 countries. And just because a central bank is no longer a member does not mean that it can ignore climate damage or nature-related risks. Storms and wildfires are on the rise in the United States particularly. 

But it all comes down to how those things are handled.

In April, at the Spring Meetings of the International Monetary Fund in Washington, many government representatives said that they would now be making massive use of renewables. So the energy transition is continuing.

Was the closure of the Strait of Hormuz perhaps even a stroke of luck for climate change mitigation?

Let me put it this way: it makes a difference, of course, whether people feel that climate policy leads to them having higher costs and thus less money. Or whether they see, as they do now, petrol and liquid fuels becoming more expensive and voluntarily move away from them.

Do you take into account dependence on fossil fuels when calculating risk, too?

Yes, in my role at the Bundesbank I also look at energy markets and energy dependencies. A lot of people in Germany might think that we have been moving away from fossil fuels for some time now. But we import 67 % of our energy, the vast majority of which comprises fossil fuels. Our colleagues at the US central bank, the Fed, had calculated that we in Europe have only switched around 3 % per year of our energy consumption from fossil fuels to renewables. So in reality we have been very slow. 

Do the potential costs of climate change solely comprise losses caused by extreme weather events?

No, we are also looking at the enormous role that ecosystems actually play in the economy. Germany, for example, is one of the countries with the greatest water loss. From 2002‑21, we lost a volume around the size of Lake Constance. And that has a significant impact on value added. 

How specifically might we visualise that?

Firms need water in their production chains. For irrigation in agriculture, for cooling systems in factories and data centres. Water is crucial to the chemicals and clothing industries, but also to the automotive sector. Just recently in France, nuclear power plants had to be taken off the grid or have their output reduced because the rivers from which they obtain their cooling water would otherwise have heated up too much. And in 2018 when the water level in the Rhine fell to only a few centimetres in several places due to persistent dry conditions, ships could no longer travel along it. That, in turn, drove up petrol prices. 

And that causes a problem for banks?

More than half of outstanding loans in 2025 granted to firms by banks domiciled in Germany depend on water. It is important to us that banks recognise the financial risk these loans entail and talk about it with their customers. After all, a bank wants firms to be able to repay their loans. 

Are banks aware of these risks?

Awareness has grown. Four, five years ago, there was a huge hype around sustainable investment, everyone wanted to be green or appear green. These days, I am often told that you never hear anything about it anymore. But both firms and banks have gone on a journey: instead of wanting to appear green because it’s expected by society, they are now addressing their very specific business risks in this area in their own interests. This is a very positive development. 

Climate-related risks have been a major issue for insurance companies for some time now, right?

Without a doubt. In recent years, many insurers have increased premiums on real estate and factories for protection against damage caused by the elements. In the United States, insurers are beginning to cease coverage entirely for some regions. Or the premiums go up so much that they are no longer affordable on an average income. That may also happen in Europe, especially in places where buildings are close to the water. It will then be virtually impossible to invest in these areas anymore. You see, insurance is typically required for any real estate loan. 

And what if there’s an increase in damages that are uninsured?

In 2025, climate-induced natural disasters led to economic losses of US$224 billion globally. Only US$108 billion of that was insured. In wealthy countries, the government then often steps in. After the flooding in Germany’s Ahr Valley, for example, central and state governments set up a €30 billion special fund. When people see on their screens that an entire region is being flooded, that people are losing their homes and possessions – then it is understandably difficult for politicians to say that the budget has nothing to give. 

But government funds are limited.

So we as a society need to take steps to prevent such tragedies. Because in addition to the toll taken on people, all the potential expenditure opens up a hole elsewhere. 

Are governments heeding your warnings?

Yes. Ministries and politicians have an interest in obtaining an undistorted view of the facts and figures. They want to know: what calculations can you do already and what can’t be calculated yet? 

Are you optimistic that we can still avert the worst?

If we continue to heat up the earth this quickly, our growth will suffer and prices will rise. But I’m not just trying to alarm people, but also to motivate them: it’s important that people stay on the ball and see themselves as part of the solution. Global warming is not predestined; we can slow it down – but that means we also have to take action. And do it now.

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